Stockbrokers and advisers have received over $186 million in ‘stamping fees’ over the past five years, according to the Australian Securities and Investments Commission (ASIC).
The figure has been revealed in an answer to a question on notice form the Parliamentary Joint Committee on Corporations and Financial Services, albeit that ASIC said it was not possible to quantify the total amount of remuneration paid in reliance on the stamping fee exemption.
“We estimate that over the five years to end 2019, stockbrokers and other financial advisers have earned over $186 million in ‘stamping fees’, or what public offer documents refer to as broker or adviser fees, from more than $14 billion of initial capital that has been raised by [listed investment companies] LICs and [listed investment trusts] LITs,” ASIC said.
“This amount does not include secondary capital raised in the form of secondary equity offers, entitlement rights and attached company options. Further, significant joint lead manager (JLM) or arranging ‘success’ fees are often paid if the IPO is successful,” it said.
“A portion of these payments are made in reliance on the stamping fee exemption and could run into the millions of dollars for a single stockbroking or financial advice firm.”
“We estimate that over the five years to end 2019, the combination of stamping fees and JLM and arranger fees, firms involved in the raisings could have earned well in excess of $330 million.”
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Same could be argued about ASIC 'earning' its adviser levy and all the other charges they ramp up that basically are automated online functions.
Also AISCk joke needs to answer for not investigating industry funds anywhere the same level as IFA's, banks and retail super, and yet in the worst possible situation, the ponzi schemes are coming undone (e.g. Host super on Friday noght changing their PDS to freeze funds, disallow member switches and not allow the Gov $10k early redemption!! WTF is that about and not only this needs major action but yet again ASIC have been caught with their pants down and not only figuratively playing with themselves but also apparently happily taking it from ISA!!!
My only pity is that it wasn't the industry fund that ASIC chose above the secure and very well regarded CSS public sector super that their staff used to have as default.
Don't speak too soon. Australian Super have vast numbers of young members who have lost their jobs and they hold substantial allocations in iliquid assets. Not to the same extent as HostPlus perhaps, but that fund is only the canary in the coalmine.
They "Estimate"....
"We estimate that over the five years to end 2019, stockbrokers and other financial advisers have earned over $186 million in ‘stamping fees’
They say it "could"...
“A portion of these payments are made in reliance on the stamping fee exemption and could run into the millions of dollars for a single stockbroking or financial advice firm.”
Again they "estimate"...
“We estimate that over the five years to end 2019, the combination of stamping fees and JLM and arranger fees, firms involved in the raisings could have earned well in excess of $330 million.”
Appears ASIC really just does not know who got how much if any or a lot, but the estimate that someone could have got something which could have been Financial Planners or Advice Firms, they estimate it could be.
Sounds a bit light on for research ASIC?
At least the brokers and advisers did some work for their fees. Not like ASIC.
So?
It's paid by the issuer. Nothing in this world comes for free, even regulation.
If Advisers earn it they have to disclose it.
If consumers have a problem with the fee they don't need to participate in the capital raising. Is ASIC expecting this service to be done for free? We don't all have guaranteed salaries paid by the taxpayer.
If advisers recommend a client participates we must put all advice in writing.
It's not practical to give written advice to a client following all best interest duties for a $15,000 placement. Nor is it practical to charge a client a $2,000 plan fee for the same thing. So most advisers like me have taken to ignore this segment of the market.
If some have arrangements with their clients whereby they can do it efficiently - then good luck to them. a 1% stamping fee is hardly incentive to take on the professional risk and ensure you meet all the necessary regulations.
Therefore it is hardly an incentive, at best it's a cost mitigating factor.
$330 million of 14 Billion of capital raising. Equates to 2.4%. Given the level of regulatory burdens and work involved on each transaction at the deal level and at the individual client level, I'm surprised capital raising is that cheap.
It is time for our profession to call out ASIC's gross ineptitude, and its deliberate ignoring of its mandate to assist in the pursuit of efficient, honest and fair financial markets. The numbers noted above suggest an average fee of 1.3 per cent. Obviously ASIC thinks financial services participants do nothing for that money. But I can assure you they do more than ASIC does for the theft, that is its industry levy - a levy unbounded in its size, and only made possible because ASIC was successful in exempting itself from the impartiality requirements of the Public Service. The end result is a cesspit of half-baked lefty lawyers, supported by the likes of Chester, Press and Shipton - all of whom are infected by neo-Marxist and post-modern bias. It is well and truly time for a far ranging investigation to this wayward regulatory monopoly. The FPA should organise a boycott of the regulatory levy.
Haha good luck getting Dante to do anything that strong or radical.
Maybe 15 - 20 years ago when the FPA board were all actively practising planners they would have had the balls to organise a boycott but not now in the world of politically correct male & female whimps
I don't think most of the people posting on here realise what's actually happened as a result of the stamping fee exemption. The size of the LIC market has grown astronomically over that period, not because they're good or better products and than a managed fund or ETF, but purely because this incentive exists.
Wondering...to say that a fee of this level is only just covering costs is ridiculous. The stockbrokers are the one's making most of this money but in most cases they are not even having to produce SOA's. They build a network of Financial Planners to who they market the next IPO to. They are nothing more than middlemen or sales reps for the listing. They split the stamping fee, which can be up to 4%, with the Financial Planner but take on no risk of their own.
The stamping fee is paid out of the capital that is raised so on listing day the LIC always trades at a discount to issue price because it's NTA is less due to the that's already been paid out.
It's a gravy train that's made many stockbrokers multi millionaires without having to write a single SOA and it's distorted the market, putting many mum and dad investors into poor performing products.
Ah I get it, thanks for explaining - basically a mirror of industry fund fees for doing essentially nothing, taking a very decent clip off the top and making the individuals in both the fund boards and the associated unions millionaires while not writing SoA's etc. while putting many mum and dad investors into utter shite investment funds that are now having liquidity issues.
This is not accurate. (1) The stamping fees have not come out of unitholder funds for several years - as far as I am aware, they are now paid by the issuer (2) There is a lot of work in dealing with a new issue - it has to be researched, assessed for suitability for clients, and funds gathered, often in a very short time-frame. (3) I have never seen stamping fees of 4 per cent. Even ASICs data shows an average of 1.3 per cent, which is at about the top of what I have seen. (4) there are a whole range of reason why LIC's might trade below NTA, one being that the listing provides the opportunity to sell, irrespective of NTA (the traded share is basically a veneer that enables some form of liquidity, notwithstanding the characteristics of the underlying asset). (5) The value of liquidity is a whole other issue - brought into sharp relief by the issues surrounding industry super funds.
Hi David, Magellan's LIT IPO last year was basically the first one where the manager paid the stamping fee out of their own funds. They did it in recognition of the NTA discount issue.
Why would you invest in an IPO when you are guaranteed of making a loss on day 1 and you could just wait until it lists and then buy it at the cheaper price on market. Stockbrokers/Advisers don't tell clients this because they are incentivised by the stamping fee.
The 4% was just used as an example but there have absolutely been fees paid at that level in the past.
You mention the amount of work involved in researching suitability for the client - do you think the stockerbroker who distributes their allocation to a network of advisers cares or even has any knowledge of who the end investors are? of course not, they pocket their fee and move on. If the product doesn't perform the adviser deals with the client complaints but I bet it doesn't deter them from going again in the next IPO.
It's just another loophole that needs to be closed so that all advisers are on a level playing field and products are judged on their merits, not how much they pay sales people to distribute them.
I don't agree with you. For one thing, people who invest in IPOs don;t pay any brokerage. More importantly, I think this whole thing about closing loopholes is a witchhunt propagated by people who never even attempt to understand the full story. I built a FP business from scratch in 2001 - everybody laughed at me, but mostly they are gone now. We manage direct portfolios for fees a fraction of most advice outfits (and often do not disclose MERS) and not much more than industry funds (which clearly have their own problems). I have a had a gutful of regulators, industry associations and know-all advisors trying to tell me how to run my business. People who hang round the product stands at FPA conferences, but wouldn't know a beta from a bag of nuts. Financial Advice is a competitive business. Fees are disclosed. Everybody has to abide by the best interest duty. Our clients are smart and ask questions. Every time advisers kowtow to the regulator's half-baked mantras, you move away from the free market and toward bureaucrats running every aspect of your business. By all means, run your business how you see fit, but I will not accept any more regulatory interference.
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